Problem
A. What is the real increase in value if $1,500 is invested for one year at 5% interest and the rate of inflation during that time is 1.79%?
B. A sport organization has a commitment from a sponsor for a $17,000 payment in three years. What is the present value of that money if it is discounted at (a) 3%, (b) 5%, and (c) 9%?
C. Suppose you are the financial manager for a recreation center that has signed an option to purchase new elliptical machines for $22,000 in two years. If you have an investment opportunity that guarantees 7% interest, how much must you invest to have the necessary funds to purchase the elliptical machines?
D. An athlete signs a five-year endorsement deal with a prominent sponsor. Under this deal the athlete will receive $5,000 each year for the first three years and $6,500 each year for the final two years. What is the present value of the total deal if the payments are discounted at 6%?
E. What is the future value of $12,000 invested at 8% interest, compounded yearly for ten years?
F. If an investor commits $4,500 to an IRA each year for 30 years and receives 6% interest, what will her total investment be worth at the end of the 30 years?
G. A bank offers customers the option of receiving interest compounded quarterly, semi-annually, or annually. If the rate of interest is the same, which is the best option for the customer?
H. What is the difference between $10,000 invested for ten years at 3% interest, compounded yearly, and at 8% interest, compounded semi-annually?